Facundo v. Yabucoa Sugar Co., 3564.

• Decision Date: 10 March 1941
• Docket Number: No. 3564.,3564.
• Citation: 118 F.2d 1
• Parties: FACUNDO et al. v. YABUCOA SUGAR CO.
• Court: U.S. Court of Appeals — First Circuit

118 F.2d 1 (1941)

FACUNDO et al. v. YABUCOA SUGAR CO.

No. 3564.

Circuit Court of Appeals, First Circuit.

March 10, 1941.

Edward O. Proctor, of Boston, Mass. (Guillermo Silva and Geigel & Silva, all of San Juan, P. R., on the brief), for appellants.

E. T. Fiddler, of San Juan, P. R. (Fiddler, McConnell & Gonzalez, of San Juan, P. R., on the brief), for appellee.

Before MAGRUDER and MAHONEY, Circuit Judges, and PETERS, District Judge.

MAGRUDER, Circuit Judge.

This was a suit for annulment of foreclosure proceedings and revendication of certain real properties, brought against the present recorded owner, whose title is derived, through various mesne conveyances, from a deed executed by the marshal pursuant to a foreclosure sale. A judgment by the District Court of Humacao dismissing the complaint was affirmed by the Supreme Court of Puerto Rico, from whose judgment the present appeal is taken.

Fortunately the facts of this protracted and intricate litigation, or series of litigations, need not be set forth at length; a drastically condensed statement will suffice for the disposition of the case, in the view we take of it.

The present plaintiffs are members or successors of members of a dissolved agricultural partnership called Cintron Hermanos. This partnership was constituted by public deed in 1891, for a term expiring June 30, 1901. In 1895, to secure advances made to the partnership by El Banco Territorial y Agricola de Puerto Rico (hereinafter called the Bank), the partnership, through its managing partners, constituted a mortgage of the properties now in question, in favor of the Bank. The loan was to be repaid in 40 semi-annual instalments, the final one to fall due on April 30, 1915.

Upon expiration of the term on June 30, 1901, the partnership was dissolved.

Several instalments being in arrears, the Bank on September 30, 1902, in virtue of an acceleration clause in the mortgage, instituted summary foreclosure proceedings in the District Court of Humacao. Service of demand for payment was made upon one of the original partners only, as binding on all the members and their successors We assume, as the insular courts have held, that such service was defective, though this conclusion is challenged by the Bank with considerable force of argument.

An auction sale, as decreed by the court, was held on January 22, 1903, but no bidder appeared. Pursuant to a further decree a second sale was held on March 17, 1903, based upon a reduction of 25% in the appraised value of the mortgaged properties. Again no bidder appeared. Thereafter, on March 26, 1903, the District Court by order adjudicated the properties to the Bank. The adjudication was recorded in the Registry of Property on May 14, 1903, and the Bank was put into possession as owner.

On April 28, 1903, a suit was brought in the District Court of San Juan against the Bank for a declaration that the above award of the properties to the Bank in the summary foreclosure proceedings was null and void, and for a decree "that matters be placed in the condition in which they were before the institution of the summary execution proceedings against the firm of Cintron Hermanos." The plaintiffs in this suit were two of the original partners, and the successors of a third deceased partner. The fourth of the original partners did not appear as a party. Various technical points were alleged as grounds of invalidity of the foreclosure proceedings, but at this time the sufficiency of the service of the demand for payment was not attacked. These points were raised in a separate suit because under the local mortgage law the debtor is not a party in summary foreclosure proceedings. El Banco Territorial y Agricola v. Cintron, 7 P.R.R. 194.

The District Court entered a decree setting aside the award. On appeal, the Supreme Court of Puerto Rico held that the second auction sale was invalid in that the sale was held in Guayama though the notice implied that it would be held at Humacao, the regular seat of the District Court. On this ground alone, the Supreme Court in its order, dated June 24, 1905, annulled the summary foreclosure proceedings "from and after the date on which the second auction sale was held in Guayama on March 17, 1903, and orders that said proceeding be restored to the condition it had at that time." Thus the court inferentially affirmed the regularity of the earlier steps in the foreclosure proceedings, including the service of the demand for payment. Cintron v. Banco Territorial y Agricola, 9 P.R.R. 220.

In compliance with the Supreme Court's judgment, the District Court of Humacao reopened the summary foreclosure proceedings and ordered another auction sale. The sale was duly held on May 19, 1906, and the properties were adjudicated to the Bank for a total bid price of $47,000, no higher offer having been made by any other bidder. On the same day the marshal executed a deed to the Bank which was recorded in the Registry of Property. The marshal's deed recites the order of the District Court, in compliance with the Supreme Court's mandate, annulling everything done in the summary foreclosure proceedings "from and after the celebration of the second auction sale held in Guayama, the seventeenth of March, 1903" and directing that another auction sale be held. However, neither the marshal's deed nor the corresponding entry in the Registry sets forth the specific steps taken by the Bank in serving the original demand for payment upon the debtor partnership. All the mesne conveyances are recorded, as is the deed of July 31, 1912, by which the Yabucoa Sugar Company, appellee herein, acquired title and under which it has remained in possession since that time. There is no suggestion that the appellee had actual notice of any defect in the original demand for payment. At no place in the records of the Registry does it appear how this demand was served. No question had been raised as to the sufficiency of the service. Indeed, it would have appeared to anyone examining the entries in the Registry that the Supreme Court had already approved the steps in the summary foreclosure proceedings up to the second auction sale. Cintron v. Banco Territorial y Agricola, 9 P.R.R. 220.

The present suit for revendication was filed on June 1, 1929. It is claimed that the summary foreclosure proceedings were invalid upon a ground never before advanced, namely, that the original demand for payment was defective because it was not served upon each of the partners. An amended complaint was filed March 1, 1932, in which "appeared for the first time in this lengthy proceeding, party Zoilo Cintron Cintron, through his heir Rene Cintron Parra." (Zoilo had not appeared as a party in the earlier suit seeking annulment of the foreclosure proceedings. Cintron v. Banco Territorial y Agricola, 9 P.R.R. 220. Just why, we cannot make out.) In a lengthy opinion the District Court held that the amended complaint should be dismissed. Various reasons were assigned, including prescription and res judicata. On appeal, the judgment of the District Court was affirmed by the Supreme Court of Puerto Rico. The Supreme Court, while expressing an inclination to agree with all the grounds taken by the District Court, rested its opinion on res judicata, the only point extensively discussed in its opinion.¹

We think the judgment below should be affirmed. Without considering other defenses, we think it clear that, regardless of any defect that there may have been in the summary foreclosure proceedings by which the Bank acquired title, the Yabucoa Sugar Company has acquired an unassailable title by ordinary prescription, under the applicable provisions of the Civil Code of Puerto Rico.²

The two chief sections of the Code dealing with prescription of ownership in real property are §§ 1857 and 1859. Under § 1857, read in conjunction with § 1840, title to land by prescription results from possession "in good faith and under a proper (justo) title" for ten years as against persons present in Puerto Rico and for twenty years as against persons absent from Puerto Rico. Under § 1859 ownership of real property prescribes "by uninterrupted possession of the same for thirty years without the necessity of title nor good faith." Since less than thirty years had elapsed between the date of the marshal's deed to the Bank in 1906 and the filing in 1929 of the original complaint in the case at bar, appellee cannot invoke § 1859.

But at the time of the original complaint, appellee had been in possession for over ten years, which was long enough for the acquisition of a prescriptive title under § 1857, if the other conditions were present, since the plaintiffs during that time have admittedly "always resided in the Island of Puerto Rico."

Appellee's possession has been "in the capacity of an owner, public, peaceful, and uninterrupted" (§ 1841).

Has this possession been "in good faith"? This must be presumed, unless the adversary maintains the burden of showing bad faith (§ 364). We must take it on the record before us that appellee as possessor had the "belief that the person from whom he received the thing was the owner of the same, and could convey his title" (§ 1850); also, that appellee comes within § 363, describing a bona fide possessor as a "person who is not aware that there exists in his title or in the manner of acquiring it, any flaw invalidating the same." It is true that appellee upon acquiring the land in 1912 was made aware by the entries in the Registry of Property that a predecessor in title had taken under an auction sale pursuant to summary foreclosure proceedings against Cintron Hermanos. But so far as the record disclosed, all the proceedings were regular. Good faith is not negatived under these circumstances by any doctrine of constructive notice charging appellee with knowledge of a "latent or occult" defect dehors the record. Ayllon v. Gonzalez, 28 P.R.R. 61. We thought otherwise in that...